ACCT
2 The following information is available for Hapley Company. The November 30 bank statement shows a $1,895 balance. The general ledger shows a $1,742 balance at November 30. A $795 deposit placed in the bank's night on November 30 bank statement. Outstanding checks amount to $638 at November 30. A customers $335 note was collected by the bank in November. A collection fee of $15 was deducted by the bank and the difference deposited in Hapley's account. A bank service charge of $10 is deducted by the bank & appears on the November 30 bank statement. How will the customer's note appear on Hapley's November 30 bank reconciliation? $320 appears as an addition to the book balance of cash $320 appears as a deduction from the book balance of cash $320 appears as an addition to the ban balance of cash $320 appears as a deduction from the bank balance of cash $335 appears as an addition to the bank balance of cash
$320 appears as an addition to the book balance of cash
Committee of Sponsoring Organizations
(COSO) the Treadway Commission (COSO) is a joint initiative to combat corporate fraud. COSO has established a common internal control model against which companies and organizations may assess their control systems. 343
Check Register
A check register, also called a cash disbursements journal, is the journal used to record all of the checks, cash payments, and outlays of cash during an accounting period. (online) 366
1 A company needs to replenish its $500 petty cash fund. Its petty cashbox has $75 cash and cash receipts of $420. The journal entry to replenish the fund includes
A debit to cash for $75 B credit to Cash for $75 C a credit to Petty Cash for $420 D a credit to Cash Over and Short for $5 E a debit to Cash Over and Short for $5
Invoice approval
AKA check authorization. Is a checklist of steps necessary for approving an invoice for recording & payment. 365
Day's sales uncollected
AKA say's sales in receivable. A measure of how quickly a company can convert its accounts receivable into cash. 362
Specific requirements of SOX
Executives & Bd of Directors must install effective internal controls. Auditors must evaluate internal controls Violators receive harsh penalties - up to 25 yrs in prison w/fines. Auditors work overseen by Public Comp Accting Oversight Board (PCAOB).
Internal control system
Mgrs use an internal control system to monitor & control business activities. Consists of the policies & procedures mgrs use to: Protect assets; ensure reliable accting; promote efficient ops; uphold company policies. 342
Triple threat of fraud
Opportunity; pressure; rationalization 345
Purchase requisition
The purchase requisition process starts with a purchase requisition or purchase request form, a document that is created by the purchaser and submitted to the department that controls finances. Consider this the part of the purchasing process where you get the thumbs up to purchase the goods and services you want (online) 351
Check
a document signed by the depositor instructing the bank to pay a specified amount of money to a designated recipient. 355
Purchase order
a document the purchasing department uses to place an order with a vendor (seller or supplier). 364
3 Using the information from question 2, what is the reconciled balance on Hapley's Nov 30 bank reconciliation? a.$2052 b. $1895 c.$1742 d. $2201 e. $1184
a. $2052
E-commerce risks
a. credit card number theft; b. computer viruses; c. impersonation 345
Establishes control for
a. verifying, approving, & recording obligations for eventual cash disbursements; b. issuing checks for payment of verified, approved & recorded obligations.
Cash equivalents
are short term, highly liquid investment assets meeting two criteria1. Readily convertible to a known cash amount & 2. sufficiently close to their due date so that their market value is not sensitive to interest rate changes. EX. money market funds 347
Signature card
bank employees use to verify signatures on checks. 355
Vendee
buyer 365
Liquid assets
cash & similar assets are called this because they can be readily used to settle obligations. 347
Principles of internal controls
certain fundamental internal control principles apply to all companies. Establish responsibilities. Maintain adequate records. Insure assets & bond key employees. Separate recordkeeping from custody of assets. Divide responsibility for related transaction. Apply technological controls. Perform regular & independent reviews
Canceled checks
checks the bank has paid & deducted from the from the customer's acct during the period. 356
Outstanding checks
checks written (or drawn) by the depositor, deducted on the depositor's records & sent to the payees but not yet received by the bank for payment at the bank statement date. 358
4. A company had net sales of $84,000 and accounts receivable of $6720. It's day's sales uncollected is a. 3.2 days b. 18.4 days c. 230.0 days d. 29.2 days e. 12.5 days
d. 29.2 days
Deposits in transit
deposits made & recorded by the depositor but not yet recorded on the bank statement. 358
Cash Over & Short
errors in making change are discovered from differences between the cash in a cash register & the record of the amount of cash receipts. The difference is reported in this account. Usually has a debit balance. 348
Cash
includes currency, coins & deposits in bank accounts, checking & savings accounts. 347
Voucher
internal document (or file) used to accumulate information to control cash disbursements & to ensure that a transaction is properly recorded.
Electronic funds transfer
is the electronic transfer of cash from one party to another. Used for convenience and low cost. 355
Invoice
itemized statement of goods prepared by the vendor listing the customer's name, items sold, sales price & terms of sale. Is also a bill sent to the buyer from the supplier. 365
Deposit ticket
lists items such as currency, coins and checks
Voucher register
once a voucher is approved & recorded in a journal. 366
Cash budget
projected cash receipts & cash disbursement are often summarized in this budget. 350
Liquidity
refers to a company's ability to pay for it's near term obligations. 347
Bank reconciliation
report explaining any differences between the checking account balance according to the depositor's records & balance reported on the bank statement. 357
Sarbanes-Oxley Act (SOX)
requires mgrs & auditors of companies whose stock is traded on an exchange (called public companies) to document & certify the system of internal controls. 342
Cost benefit principle
says that the costs of internal controls must not exceed benefits. 346
Voucher system
set of procedures & approvals designed to control cash disbursements & the acceptance of obligations. 350
Bank statement
shows the activity in an account. 356
Separation of duties
the work of one individual acts as a check on the other to prevent fraud & errors. It is not duplication of work.
Petty cash
to avoid the time & cost of writing checks for small amounts, a comp sets up petty cash fund to make small payments.
Receiving report
used within the company to notify the appropriate persons that ordered goods have been received & to describe the quantities & condition of the good. 365